Media

Investment thesis

We believe that the adoption of British firm Kantar Media (Kantar) as the new ratings agency apart from The Nielsen Company will change entirely the landscape of the Thai broadcasting industry by 3Q16 once its results are released by unlocking ratings for some digital channels, such as GMM25, whose main audience is teenagers. GRAMMY has the biggest scope for a ratings upside in FY16 led by its differentiated content to peers’ and low FY15 rating base. We recommend that investors take positions in the firm during 1H16 for the over 12-month horizon in anticipation of the 2H16 turnaround. In the meantime, WORK and RS remain our top picks for the next 6-9 months, led by WORK, for its most obvious earnings growth visibility in 2H15-1H16, and RS, for its robust FY16 earnings outlook on the low FY15 base comparison.

Kantar’s results to unlock GMM25’s ratings in 2H16 

The Media Agency Association of Thailand and the Media Agency Bureau selected Kantar as the second ratings agency to assess Thai organizations in July 2015. We expect Kantar to release the first results in 3Q16 and believe that the new rating outcomes results will change Thai broadcasting’s landscape, as it will look at the bigger sample size of 10,000 households (against Nielsen’s 2,000-3,000 households) and will use a multi-screen measurement system, which includes TV sets, mobile phones and other devices. This will unlock the ratings for GMM25 Channel, whose target group is teenagers. 

Ad spend industry expected to bounce strongly in 2H16

We believe that the ad spend industry has already bottomed out in 3Q15. In light of the government’s stimulus package announcement in September and the start of the fourth-quarter high season, we expect ad spends to improve mildly on the slightly improved consumer confidence from September through to 4Q15 before a strong bounce in 2H16. We estimate that nominal private consumption growth will be zero in 3Q15, or bottom-out point, before its moderate recovery to 1.5% growth in 4Q15 and a 0.8% YoY rise for FY15 (against a 2.4% YoY rise for FY14), or bottom-out level, before its strong recovery to a 4.8% YoY rise in FY16 (led by the government stimulus packages). 

GRAMMY has biggest scope for ratings upside in FY16

We expect ratings of WORK, RS, ONE and GMM25 to rise further from 4Q15 to FY16 on the back of stronger content. We expect WORK’s to be higher in 4Q15-FY16, bolstered by new sport and quarterly seasonal shows, higher ratings of its existing shows and the launch of a super-prime Thai soap opera. With its clear target group and strong positioning of soap operas for the rural segment, we expect RS’ ratings to expand more in 4Q15-FY16. Among other digital channels, we see the greatest scope is for a GRAMMY ratings upside from its two digital channels in FY16, led by new ratings result released by Kantar starting in 3Q16, which will include multi-screen assessment, their differentiated digital content than peers in FY16 and low rating base in FY15.

Outlook

Kantar’s rating results to unlock GMM25’s ratings in 2H16: The Media Agency Association of Thailand (MAAT) and the Media Agency Bureau (MRB)—which consists of representatives from MAAT, national free-TV operators, cable/satellite TV broadcasters and media agencies—selected British firm Kantar Media, the global multi-platform audience measurement company whose expertise ranges from traditional TV digital media platforms to mobile and social media, to be the second ratings agency firm for Thailand in July 2015, in addition to current operator,  the Nielsen Company. We expect Kantar to release its first ratings results in 3Q16. 

We believe that Kantar’s results will change the landscape of the Thai broadcasting industry, which entirely depends on Nielsen’s rankings. The Nielsen Company uses only a single screen platform via TV sets to measure ratings and audience share and adopts a smaller sample size. In contrast, Kantar will take measurements using a multi-screen system, which includes TV sets, mobiles and smartphones and other devices (including IPTV, tablets, and computers). Moreover, Kantar’s sample size will be greater (10,000 households against Nielsen’s 2,000-3,000). If the results are acceptable, it is more likely that TV operators and media agencies will drop Nielsen’s and use Kantar’s. Hence, it will unlock the ratings for those channels whose target group is teenagers (such as GRAMMY’s GMM25 Channel) who consume digital content via smartphones and other 3G devices rather than TV sets. 

Gradual ad recovery from 4Q15 to 1H16 before a strong 2H16 bounce: The ad spend industry remains gloomy in 3Q15, led by a persistent weak consumption environment, which we believe already bottomed out in August 2015. In light of the government’s stimulus package announcement in September and the start of the fourth-quarter high season, we expect the ad spend to improve mildly on the slightly improved consumer confidence from September through to 4Q15. We believe that product advertisers and media agencies will start to place more advertisements in 4Q15 in anticipation of greater retail sales in 2Q16. Hence, we expect a strong bounce in ad spending in 2H16.

We estimate that nominal private consumption growth will be zero in 3Q15, or bottom-out point, before its moderate recovery to 1.5% growth in 4Q15. We expect nominal private consumption to rise 0.8% YoY in FY15 (against a 2.4% YoY rise in FY14), or again bottom-out point, before its strong recovery to a 4.8% YoY rise in FY16 (underpinned by the government’s stimulus package). However, the growth for TV and total ad spend (including analog, cable and satellite TV and digital TV) are assumed to normalize their growth to 4.8% and 3.5%, respectively, in FY16 (led by the full-year digital ad spend recognitions in FY15-16), against 10% and 7% growth for TV and total ad spends in FY14 (only eight months of digital ad spend).